With prosecutors seeking a 30-year prison term for former CEO Cho Dae-woong, founder of Cellivery, who was indicted on charges including violating the Financial Investment Services and Capital Markets Act, the rise and fall of Cellivery, once hailed as a rising star in Korea's biotech industry, is drawing attention again.
The company, which entered KOSDAQ as the first to list under the growth-track exception and once topped 3 trillion won in market capitalization, was ultimately delisted, and its founder now faces criminal trial.
◇ A market that bet on the future value of technology
Founded in 2006, the biotech venture Cellivery drew market expectations by pushing to develop treatments for Parkinson's disease, pancreatic cancer, and rare diseases, backed by its proprietary platform technology for delivering drugs to target sites such as inside cells or brain tissue (TSDT·Therapeutic molecule Systemic Delivery Technology).
Founder and former CEO Cho Dae-woong holds a Ph.D. in pathology, microbiology, and immunology from Vanderbilt University in the United States and served as a professor at Chonnam National University Medical School. In 2001, along with a research team at Vanderbilt University School of Medicine, Cho developed a technology to deliver active enzymes into living cells and animal tissues and activate them, and published the findings in the international journal Nature Biotechnology in 2001.
The study drew attention in academia by demonstrating the potential of intracellular protein delivery technology.
Cellivery, recognized for its corporate value based on this technological prowess, entered the KOSDAQ market in Nov. 2018 through the growth-track exception listing system. The growth-track exception allows listing by placing greater weight on future growth potential than on current performance.
Early after listing, Cellivery was regarded as a promising player in the biotech industry. It drew attention by signing a co-development deal with Japan's Takeda for central nervous system disorder treatments in 2018, and appeared to be accelerating development of key pipelines such as a Parkinson's treatment.
In particular, the COVID-19 pandemic became a catalyst that boosted Cellivery's corporate value. As expectations grew for developing a COVID-19 treatment, the share price surged, and market capitalization soared from about 500 billion won in early 2020 to 3.1423 trillion won in Jan. 2021. It was cited as a representative success case for the growth-track exception listing system.
At the time, large-scale stock option exercises by executives also drew buzz. In the first half of 2021, one executive reaped more than 23 billion won in gains from exercising stock options, and other executives realized profits in the billions of won.
But it failed to produce clear results in clinical development.
According to development progress disclosed then through filings and IR materials, the Parkinson's treatment remained at the stage of completing preclinical studies and seeking to enter clinical trials. The COVID-19 treatment received U.S. Food and Drug Administration (FDA) approval for an investigational new drug (IND) application for a phase 1 trial, but subsequent clinical development did not lead to concrete results.
As clinical results, technology licensing, and commercialization achievements failed to meet investor expectations, the stock eventually turned downward, and by Sept. 2021 market capitalization had fallen back below 1 trillion won.
◇ Acquiring a wet tissue maker instead of new drug development… trust collapses
The decisive turning point came in 2021.
At that time, Cellivery raised about 70 billion won by issuing convertible bonds (CB) and through paid-in capital increases. The company said it planned to use the funds for research and development of new drugs such as a COVID-19 treatment, but skepticism in the market grew after it became known that the company acquired wet tissue manufacturer Ajin Clean (now Cellivery Living & Health) and provided it with hundreds of billions of won in funding.
In fact, while Cellivery held more than 100 billion won in cash and cash equivalents at the end of 2021, cash dwindled rapidly as investments in subsidiaries and operating expenditures followed. The market questioned why a biotech new drug development company poured large sums into a household goods business.
The crisis led to financial problems. In 2023, Cellivery received a disclaimer of opinion from its external auditor due to a limitation of audit scope and uncertainty about going concern, and trading was suspended in Mar. of the same year. It subsequently fell into a state of complete capital impairment and was ultimately expelled from KOSDAQ.
Prosecutors believe that in the process, Cho and others deceived investors into thinking the funds would be used for research and development of new drugs, raised about 70 billion won, and then used the money for other purposes.
They also brought charges that Cho avoided losses by disposing of shares after learning in advance about the possibility of being designated for administrative issues and trading suspension. At the sentencing hearing on the 11th, prosecutors sought a 30-year prison term for Cho and seven years for a board director. They also asked the court to impose a 250 billion won fine and forfeit about 67.6 billion won.
◇ The end of the boom in exception listings… an era of verification
The Cellivery case did not end as the mere failure of a venture company. The fall of the first corporations listed under the growth-track exception was assessed as a case that showed the limits of the exception listing system and the need for fixes.
In fact, the Korea Exchange (KRX) expanded the evaluation items for technology exception listings from 26 to 35 starting in the second half of 2021 and strengthened verification not only of technological merit but also of business viability.
Post-listing checks on research and development progress and statements of fund use were also tightened. As a result, the number of new listings by biotech corporations has decreased further since 2022. Some say that since 2022 listings have centered on corporations that have proven both technological strength and business viability.
An industry official said, "The essence of the Cellivery case lies less in the technology itself than in expectations failing to be proven in reality," adding, "Biotech companies must ultimately prove market trust through research and development results and management transparency."
A brokerage official said, "As the threshold for exception listings has risen, it has served as a turning point from quantitative growth to a phase of qualitative growth," adding, "It is positive that the system has evolved to evaluate technology verification, commercialization potential, and even post-listing sustainability."